The primary technology utilized for credit and debit payment cards today is a magnetic stripe. The payment card's magnetic stripe contains a customer's account number and other necessary information to conduct a payment transaction with a merchant. In a typical “face-to-face” payment transaction, the customer or sales clerk swipes the payment card through a merchant's Point of Sale (POS) terminal that reads the information that is stored in the magnetic stripe. The merchant's POS system connects to a payment network to validate and approve the payment transaction and prints a receipt. The customer signs the receipt to complete the payment transaction. For payment transactions involving debit cards the customer may be requested to type in a Personal Identification Number (PIN) to authorize the transaction and/or sign the printed receipt. The process of swiping the card through the POS and either signing the sales receipt or typing in a PIN provides proof that the card holder is present with the payment card at the time of purchase, creating a “Card Present” type of payment transaction.
Customers also use these magnetic stripe payment cards for non “face-to-face” payment transactions, to purchase goods and services from remote merchants via the Internet, the telephone or mail order catalogs. For these types of non “face-to-face” payment transaction, there is no merchant POS terminal to accept the magnetic stripe payment card. Referring to FIG. 1, in a typical non “face-to-face” payment transaction a customer 102 makes a purchase from a remote merchant server 104 via the Internet 80. The customer 102 makes his purchase selection and fills out a payment form on the website of the merchant. The information on the payment form includes type of payment card (credit or debit), payment card number and expiration date. The merchant server 104 transfers the type of payment card, payment card number, expiration date, and information about the purchase including price, quantity, item number, and date of transaction to a payment server 106. The payment server 106 contacts the financial institution 112 that has issued the specific payment card and handles the payment transactions for the specific payment card. The financial institution 112 executes the payment transaction and sends a confirmation notice to the payment server 106. The payment server 106 routes the confirmation notice to the merchant server 104 and the merchant server 104 fulfills the customer's purchase order. The payment card information and the purchase order information are usually encrypted for security purposes. The encrypted information may be transferred via Internet, fax, or telephone connections 80, 82, and 84. When the transaction occurs via the telephone the customer 102 either dictates the card number and expiration date to a sales representative or enters them using the telephone keypad. In these non-face-to-face payment transactions via the Internet, fax, telephone, or mail order, the merchant server 104 has no means of verifying the presence of the payment card (i.e., card-not-present (CNP)) and the identity of the customer 102. This lack of authentication of the customer 102 and the payment card presents an opportunity for fraud. For example, a person other than the cardholder may obtain the payment card number and expiration date from a discarded payment form and use them to make new purchases. As a result the merchant pays significantly higher transaction fees for CNP transactions than those for Card Present transactions.
The ubiquity of mobile phones combined with magnetic stripe readers provides a new range of POS terminals for merchants and customers to conduct financial services transactions. While there are several magnetic stripe readers available today for mobile phones (Semtek, Symbol, Apriva), these prior art magnetic stripe readers require a customized interface for each different type of mobile communication device and the specific network that is connected to. Accordingly, there is a need for a universal connector that can be used in all types of mobile phones and all networks.
The general concept of a universal connector that can connect to any type of mobile phone and network is described in PCT patent application No. WO 99/66752, entitled “Communication Method and Apparatus Improvements”, the entire content of which is incorporated herein by reference. Referring to FIG. 2, this universal connector 200 connects to the mobile phone's existing Subscriber Identification module (SIM) slot 204 and utilizes a Central Processor Unit (CPU) 202 to coordinate the activities of multiple SIM cards 152, 156 and a full-size external smart card 153. This universal connector may be implemented as an attachment to a mobile phone or may be embedded in the mobile phone. Although this implementation includes several SIM cards and a card reader for regular contact type smart cards, it does not include a magnetic stripe reader. Accordingly, there is still a need for a universal magnetic stripe reader that can be attached to any phone and any network.